With managed fund traders building a net short position and the market technical action looking like a further set-back is possible, new buyers can be patient and wait for corrections to buy. The supply set-up for early 2009 is turning more supportive with declining supply of all meats led by a significant drop in poultry production and still tightening feedlot supply for cattle. February cattle bounced back to close moderately higher on the session yesterday and recouped part of the sharp losses from Friday. Ideas that the market was overdone on the downside on Friday and that the Mexico ban from key packing houses will be only short-lived helped to support. If fact, the Agriculture Ministry from Mexico announced that the suspensions for 21 of the 30 plants should be lifted by the end of the session yesterday. Cash cattle traded $85.00-$86.00 to start the week which was seen as a positive development as well. Boxed-beef cut-out values at mid-session came in at $144.64 which was up 18 cents from the previous session and up from $141.89 on December 19th. The estimated cattle slaughter came in at 125,000 head yesterday. This is up from 124,000 last week and up from 104,000 a year ago as this time. The Commitment-of-Traders report for cattle showed a continued selling trend from managed funds who have built up a hefty net short position of over 15,000 contracts. This selling was more than offset by index funds who were noted buyers of more than 1000 contracts for the week ending December 22nd to hold a net long position of 97,995 contracts. Short-term demand factors remain mostly negative as consumer spending is slow, weekly export sales data is negative and pork supply is a little higher than expected. Traders can wait for correction to buy.

TODAY’S GUIDANCE: Managed funds hold a hefty net short position of over 15,000 contracts so holding support and turning higher could be seen as a reason to exit. With the outlook for declining supply into 2009, corrective breaks look like buying opportunities.

This content originated from – The Hightower Report.